On October 3, 2022, in Commodities & Minerals Enterprise Ltd. v. CVG Ferrominera Orinoco, C. A., the Second Circuit Court of Appeals resolved a novel question of first impression in favor of petitioner Commodities & Minerals Enterprise Ltd. (CME), affirming the recognition and enforcement of a more than $12 million arbitral award in its favor. Bruce G. Paulsen, Brian P. Maloney, and Laura Miller acted as counsel for CME in the underlying arbitration, at the trial court on confirmation of the arbitral award, and on appeal to the Second Circuit.
The Second Circuit’s decision breaks new ground with respect to the recognition and enforcement of international commercial arbitration awards governed by the Federal Arbitration Act (FAA) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), where – as in this case – an arbitral award is made against an entity claiming immunity under the Foreign Sovereign Immunities Act (FSIA).
In the case, the Court resolved an important open question concerning service, and held in relevant part that a party applying to a court to confirm a foreign arbitral award under Chapter 2 of the FAA and the New York Convention is not required to serve a summons on the adverse party to satisfy the FAA’s service of notice requirement, despite the FSIA’s apparent instruction in 28 U.S.C. § 1608(b) to serve a “summons and complaint” in order to obtain jurisdiction over a an agency or instrumentality of a foreign state. The Second Circuit also found that the district court properly enforced the arbitration award on the merits, because appellant CVG Ferrominera Orinoco C.A. (Ferrominera) failed to establish that the arbitration agreement was invalid under U.S. maritime law, the Panel did not exceed its authority under the arbitration agreement in issuing the award, and the award is not contrary to U.S. public policy.
After reviewing the competing statutory schemes, the Court held that the New York Convention and the FAA require service of only “notice of the application” to confirm a foreign arbitral award, and not also a summons. The Court reasoned that “(1) the FAA itself defines the documents to be served, and cross-references other provisions (including Rule 4 [of the Federal Rules of Civil Procedure] and the FSIA) only to fill gaps in the permissible manner of serving those documents; and (2) it would make no sense to import the FSIA’s requirement of service of a ‘summons and complaint’ into the FAA because motions to confirm arbitral awards are not commenced by the filing of a complaint.”
The Second Circuit’s decision upholds the purpose and distinct nature of a “summary proceeding” seeking to confirm an arbitration award, as opposed to a plenary action, noting that summary proceedings may be “conducted without formal pleadings, on short notice, without summons and complaints, generally on affidavits, and sometimes even ex parte.” Under these circumstances, the Court held that the FAA requires service in accordance with the FSIA’s procedures, but that the particular documents required to be served (i.e., the “notice of the application”) are defined by the FAA – and does not separately require a summons or complaint.
The Court’s ruling brings CME one step closer to recovery upon the December 2018 Final Awards it obtained in consolidated arbitration proceedings against Ferrominera in a matter that dates back to 2016. The underlying arbitration proceedings spanned nearly three years, during which dozens of hearings were held, numerous fact and expert witnesses testified, and both parties made voluminous written submissions on issues ranging from discovery to prejudgment security.
If you have any questions on this recent ruling, please contact Bruce G. Paulsen (212-574-1533) or Brian P. Maloney (212-574-1448).
